Bitcoin for the Masses: Coinapult Targets the Unbanked
EspañolIra Miller is CEO of Coinapult, a bitcoin-wallet service that provides price stability and makes bitcoin’s volatility “optional.” It allows users to lock their money in by tying it to either gold, silver, or another currency. Users can then send their bitcoins through the network via email or SMS text messages. In fact, Coinapult was the first bitcoin wallet to develop SMS technology to send bitcoins around the world.
Miller is passionate about the potential financial uses of SMS technology to help bitcoin reach the unbanked population of world, which, according to the World Bank, is almost 2.5 billion people: “The real strengths [of bitcoin] are access and making these tools accessible to more people. If you can do that, then you will succeed,” Miller shared with the PanAm Post.
The trend in the United States toward regulation of bitcoin is a sign to Miller that it will likely not be the best place for him to reach that unbanked population — since bitcoin will then be hindered by the same restrictive mandates on traditional banks. That is why, after founding Coinapult with his friend Erik Voorhees in January 2012, they decided to move their headquarters in April 2013 to Panama City. The now enjoy the freedom of an economy with no central bank and no legal tender laws.
What was the breaking point for coming to Panama?
Initially, the technology that we used was allowing people to send bitcoin over email and SMS … I am very passionate about the SMS technology, the promise and the potential of it, to help the unbanked people of the world — people that have been left out of the current banking system.
After doing business in the United States for the first year, we realized we just weren’t going to reach the kind of people we wanted to reach. And also, the United States was starting to come out with all these rules for their own people for using bitcoins; that really was going to make it impractical.
If bitcoin is going to help unbanked people, they can’t impose the exact same barriers to entry that banks have.
As an example, if you receive bitcoins from somebody, you have to get their driver’s license and all these other things. Most people don’t have these documents, and if bitcoin is going to help unbanked people, they can’t impose the exact same barriers to entry that banks have.
If we would like to help a business in New York accept bitcoin, we would have to collect all that information from every customer they have. It is basically banks all over again; they are not going to let any new people in. It’s not going to help poor people.
These regulations came with the Bit License, which is still just a proposal for New York, but we just saw this as the direction things were going, in the United States at least … it wasn’t really aligned with what we wanted to do, which is to reach out to unbanked people.
So, Why Panama?
Panama was very attractive to us. We were looking at different places around the world that had freer financial laws, and we really liked Panama because of its laws against central banking. Central banking has been against the Panamanian Constitution for over a hundred years, and really they have no established preference for one currency or another. There is no legal tender law.
We thought they would be more open to bitcoin. The people obviously can use it, but the business community and the government don’t have big, established interests that would like to stop it. In Panama, you can make a contract in bitcoins and it is as valid as balboas or euros.
What is the status of bitcoin adoption in Panama?
It is still very new … in general the market here is very interesting, and I think bitcoin is another example of this. You have kind of a split, and I don’t mean it in the popular sense of the rich against the poor … Panama is developing so quickly that people are catching up in different paces, so in some places bitcoin has started to catch on very well.
For instance, there is a work-sharing space in Casco Viejo [the historic center] that takes bitcoins for rent … there is a restaurant, there is another company called Panama Bitcoins, where you can pay bills. But at the same time, there is not really wide adoption; still it is a small country and a small market. Most business don’t have websites, or if they do they are not very up to date. People just don’t use [the internet] as much.
What services does Coinapult offer that make it different?
Coinapult is primarly a wallet, so it helps people send, receive, and store bitcoins. We offer these services to people so they can send and receive over the bitcoin network, email, and SMS. We actually developed the first SMS bitcoin wallet. There are a lot of bitcoin wallets where you can send money to cell phones, and when they open it up, it goes to a web browser, but if they don’t have internet access, how could they use it? There are a few others that now offer the SMS approach.
Locks allow users to tie the value of their bitcoins with us to another asset.
As for storing bitcoins, we have a new service called locks. These locks allow users to tie the value of their bitcoins with us to another asset, for instance gold, silver, dollars, euros, or pounds.
The use case for this: we think that a lot of people that might find use in bitcoin might want to send money to someone overseas or someone who receives online payment on their business. A lot of these people are not as comfortable with holding bitcoins, because of the price volatility … if you are running a store in Buenos Aires, and you accept bitcoins and you want to pay your suppliers in bitcoin, there is a time gap in between. Maybe you have to store the bitcoins for two weeks or a month, and in the meantime, the price could go down by a 50 percent, which means you can’t pay your bills anymore.
So we accept these bitcoins and then lock them to the dollar, or gold, and when you are ready to spend them you unlock them to pay somebody else, or send the value as gold or dollars to the next person.
How do you assure that people’s money is safe?
Coinapult operates on a 100-percent reserve basis, which means that if you have one ounce of gold locked, Coinapult actually owns one ounce of gold at the price of the second. When you unlock your bitcoins, we sell the gold and buy the equivalent amount of bitcoins and give them to you. We have all the resources: gold, dollars, silver, euros, and British pounds.
You don’t work in every country of the world. How do you select them?
Coinapult currently doesn’t do business in Panama. We are based in Panama, but we work in the rest of the world. We are still figuring out the local, legal landscape before offering the service here. We are trying to apply industry, risk management, and transparency standards for audits … in some countries, that is more complicated. We are reacting to the local laws.
In the United States, for instance, the Bit License would make things work as a bank. We choose not to do business there, so we don’t have to impose those barriers on everyone else in the world.
Right now, we are blocking countries with the highest risks. They would be the Office of Foreign Assets Control (OFAC) Blacklist, from the US Department of the Treasury, like Iran, North Korea — basically any extremely repressive regime.
Coinapult can still be used in any country in the world, except 15. We’ll be able to offer it very soon in Panama, because we are confident with the regulatory environment.
Which would be an incentive to use bitcoin in Panama?
Bitcoin has a lot to offer Panamanians. They have a relatively developed financial system, but there are a lot of people left out of it, and bitcoin is a simple way to send money to their families or complete whatever financial transaction that they want without having to go through paperwork.
Is there any actual risk of regulations in Panama?
Panama is changing for sure, but the financial industry here is very well established, and it goes back for a long time. Governments have changed and the country has experienced much larger changes than this last election, and the financial industry has stayed and it is healthy.
Beyond that, at the beginning of the year, Panama passed a law to tax worldwide income, and within two weeks it was repealed. Everyone, not just the bankers, said “this is a bad idea; we are going to lose jobs and hurt the economy. You can’t do this.” So I think that to some extent, the Panamanian people are conscious and will defend what they think makes the country successful.
What do you believe is holding bitcoin back from becoming a mainstream?
I think it is lacking access. Up to the present day, bitcoin has been mostly internet technology, so you have to have access to the internet — and not only in a computer lab once a week in your village. You have to most likely use it every day and really be deeply into the internet.
Bitcoin has been mostly internet technology, so you have to have access to the internet — and not only in a computer lab once a week in your village.
And I think to complement that, most of the investment in bitcoin industry hasn’t focused on the unbanked. They are focusing on the “shopping springs.”
They are trying to make it slightly easier for Americans and British people to purchase laptops online, and things like that, which is admirable … bitcoin is very good at that, and can succeed at that, but that is not really the only goal.
They’ve lost the focus on what the real strengths of bitcoins are. The real strengths are access, and to make these tools accessible to more people … if you can do that, then you will succeed. And that is what we haven’t been doing well, as a community: reaching out to the people that need bitcoin the most, the most interested in something like this.
In making Bitcoin popular, would the use of locks require some economics education? In a country like Venezuela, with heavy regulation, do you think people would understand what really locks mean?
My experience is actually the opposite. I have been to Argentina, which has a similar situation, and what I found is that everyone understood money much more than they understand it in the United States. They know what inflation is, or if it has an effect on you on a daily basis.
Every cab driver in Buenos Aires knows the inflation rate and that he shouldn’t hold pesos. Everybody understands what the exchange rate is, and I saw that kind of understanding on a personal level, about the relative strengths of types of money, or what can happen if your government is irresponsible with your money; they are concerned about these things.
Even if they haven’t taken economics classes in college, and they don’t really understand why they should be concerned, they still are concerned. And they are open to alternatives.
In the United States, no one cares about inflation: “What do you mean? The dollar is the best.” They wouldn’t even question it if you were to talk about alternative money.
So you say, the history of economic crises in South American countries gives people knowledge about their causes?
Absolutely. In the United States, you have this façade of stability. I talked to a Venezuelan girl who didn’t know what bitcoin is, and I asked her if she likes gold. She said yes, of course, and she explained to me that in Venezuela, sometimes people use gold to trade.
It’s natural, so I explained that she could tie her money to gold, and send it. You don’t have to worry about the Venezuelan rules, or traveling to access dollars, or that kind of thing. They might not think of gold as money, explicitly, but they are very comfortable with the idea.
How will you expand this access?
We are doing this experiment, Let the Bit Drop. Basically, in the fourth quarter of this year — we are thinking November 1 — we are going to throw a party on a Caribbean-island nation, and we are going to give every single person in the nation some bitcoin.
The goal is to create the largest, high-density population of bitcoin users in the world, and almost all of them are going to be among the unbanked. So one of the things we are curious about is how they are going to use it: will they start sending each other money, or spending it on local businesses?
We are working with the government of the island, so we still can’t say where this is going to be.
So it is actually a real, physical party?
Yes. We are going to play some music, teach them how bitcoin works, put up some ATMs, and reach out to local business, so they accept it.
We are receiving donations, to reach these unbanked people, and to get bitcoin out of the western-internet bubble that it is currently in.
Editor’s note: the Let the Bit Drop party has been postponed until after the new year.